Article

One Big Beautiful Bill Act: Key individual tax, trust and estate provisions

Initial analysis of the House-approved bill

Jun 05, 2025 · Authored by Jessica L. Jeane, Michael Lum, Andrew Whitehair

Outlined below is an initial analysis of key individual tax provisions within the House-approved bill. It’s important to note that this is not final legislation; all tax provisions are subject to change in the Senate. The upper chamber begins its consideration of the measure the week of June 2 and is expected to significantly modify the House-approved bill.

Tax rates and bracket extensions: Tax Cuts and Jobs Act (TCJA) tax rates and brackets (inflation adjusted) would be made permanent. Except for the top 37% bracket, all brackets will receive an additional year of inflation adjustment for tax year 2026, resulting in slightly higher dollar thresholds.

• Not included: A millionaires’ tax or other increase in the top marginal rate

Estate and gift tax: Permanently increase the gift and estate tax exemptions to $15 million beginning in 2026, with inflation increases annually thereafter.

• Not included: A repeal of the estate tax, which appears unlikely in the near future

Itemized deduction limitation: The TCJA’s repeal of the Pease limitation would be made permanent, but a new overall limit on itemized deductions is introduced for those in the top 37% tax bracket. This new limit effectively curbs the tax benefit of itemized deductions for those in the 37% bracket and reduces the benefit from state and local tax (SALT) deductions. The ultimate tax effect is circumstance dependent, but for most taxpayers in the top bracket, this will cut the tax benefit from itemized deductions by 2-3%.

SALT cap: The TCJA’s limitation on SALT deductions remains, but the bill increases the deduction to $20,000 (married filing separately (MFS)) and $40,000 (all other filers). The deduction phases-down for taxpayers with modified adjusted gross income (MAGI) exceeding $250K (MFS) and $500K (all other filers) but not below $5,000 (MFS) or $10,000 (all other filers). Starting in 2026, the deduction cap and phase-down threshold will increase 1% annually through 2033 and then will remain at 2033 levels.

• Retroactive: Consider whether a taxpayer would benefit from making 2025 Q4 state income taxes before year-end 2025
• Pass-through entity tax (PTET): The proposal requires partnerships and s corporations to separately state a partner’s or shareholder’s share of “specified taxes” (i.e., state and local real estate, personal property, and income taxes, etc.) and disallows entity level SALT deductions if the entity is not conducting a qualified trade or business (defined in section 199A(d)). This would deny the PTET workaround for specified service trade or business (SSTB) (i.e., service businesses).

Enhanced standard deduction/personal exemption elimination: Makes permanent the larger TCJA standard deduction, also temporarily increases the standard deduction by $2,000 (married filing jointly (MFJ)), $1,500 (head of household (HOH)) or $1,000 (other filers) for tax years 2025 through 2028 and permanently eliminates personal exemptions.

• Retroactive: The temporary increase of standard deduction is retroactive for the 2025 tax year, but it should have minimal planning impact given the small increase
• Consider: The standard deduction for 2025 would be $32,000 (MFJ), $24,000 (HOH) and $16,000 (other filers)

Enhanced senior citizen deduction: Taxpayers who have attained age 65 in tax years 2025 through 2028 receive an additional $4,000 senior bonus amount, which is phased out at MAGIs over $150,000 (MFJ) and $75,000 (other filers). The amount is allowed for itemizers and non-itemizers and is not indexed for inflation.

• Retroactive: This provision would be effective for the 2025 tax year
• Consider: Social security benefits remain taxable, but this provision was introduced as a partial fulfillment of President Trump’s campaign pledge

Enhanced Child Tax Credit (CTC): The $2,000 TCJA CTC is made permanent, the TCJA’s CTC phaseouts of $200K/$400K (Single/MFJ respectively) are made permanent and not indexed for inflation, and the CTC receives a temporary increase to $2,500 for tax years 2025 through 2028.

• Retroactive: The temporary $500 hike is retroactive for the 2025 tax year, but it should have minimal planning impact given the small increase

Alternative Minimum Tax (AMT): Makes permanent the TCJA AMT exemption amounts and phaseout thresholds, which drastically cuts the number of taxpayers subject to AMT.

• Consider: Resolves the uncertainty regarding the possible return of AMT, which could impact taxpayers holding incentive stock options (ISOs) or shares from an ISO exercise

Qualified mortgage interest deduction limitation: Makes permanent the $750K ($375K if MFS) limit on qualified mortgage interest and the elimination of home equity interest.

Deductible car loan interest: For tax years 2025 through 2028, the proposal allows a deduction for up to $10,000 of new car loan interest on U.S. assembled vehicles. Only new car loans taken out or refinanced (if it doesn’t add to the balance of the original loan) in 2025-2028 are eligible. The deduction phases out for MAGI exceeding $200K (MFJ) and $100K (other filers) [fully eliminated at $250K (MFJ) and $150K (other filers)]. The deduction is available for non-itemizers.

• Retroactive: This provision is retroactive to the beginning of 2025

Casualty losses: Makes permanent the limitation on deductions for personal casualty losses.

• Consider: Whether the taxpayer can still deduct personal casualty losses resulting from a federally declared disaster area or another provision

Miscellaneous 2% itemized deductions: Makes permanent the TCJA’s elimination of miscellaneous 2% itemized deductions.

• Consider: Consulting with a high-net-worth wealth specialist regarding potential methods for converting nondeductible investment expenses into deductible expenses, such as by using a Lender Management structure for family offices

Charitable deductions for non-itemizers: Resurrects and slightly reduces the pandemic-era above-the-line charitable deduction for non-itemizers. Taxpayers can deduct $300 (MFJ) or $150 (other filers).

• Retroactive: Although a small benefit, this provision is retroactive for 2025 that can be taken advantage of if desired and gather appropriate contemporaneous written documentation

Scholarship granting organization credits: $5 billion worth of tax credits available annually for tax years 2026 through 2029 for contributions of cash or marketable securities to scholarship granting organizations (SGOs). SGOs are organizations for which substantially all activities provide scholarships for qualified elementary and secondary education expenses of eligible students. Taxpayers may claim a credit of the greater of 10% of AGI or $5,000.

• Consider: The credits will operate on a first-come, first-serve basis, so interested taxpayers should contribute to qualifying SGOs early in 2026

Carried interest: The proposal does not include any additional limitations on carried interest.

Trump child accounts: A new tax-favored account would be created for U.S. citizens under age 18, which functions as a hybrid between a traditional custodial account, a 529 plan and an IRA. The federal government will automatically open and contribute $1,000 to an account for every U.S. Citizen born during 2025 and through 2028. Additionally, contributions of up to $5,000 (inflation adjusted) per year can be made from birth through age 17, with no distributions allowed until age 18. The beneficiary is limited to withdrawing an aggregate 50% of the account from age 18 through age 24, has unrestricted access at age 25 and must withdraw all remaining assets at age 31. Distributions for qualified expenses (education, small business/farm startup, first-time home purchase) are taxed at capital gains rates and non-qualified distributions are taxed at ordinary rates (with a 10% penalty if distributed before age 31).

High-net-worth individuals should also consider the following provisions which may impact their tax situation or future financial planning:

199A qualified business income deduction: Makes permanent the 199A qualified business income deduction, and the deduction percentage would increase to 23% starting with the 2026 tax year. The wage and investment limitation calculation changes slightly to be more beneficial for owners of service businesses.

Bonus depreciation and Section 179: The proposal grants 100% bonus depreciation for qualified property acquired and placed into service on or after Jan. 20, 2025, through Dec. 31, 2029. For taxable years beginning after Dec. 31, 2024, maximum expensing under Section 179 would increase to $2,500,000, and the phaseout threshold would increase to $4,000,000.

Opportunity Zones (OZ): The TCJA OZ program remains unchanged, but the bill proposes to designate new OZs and create a second round of OZs beginning Jan. 1, 2027. Amounts invested prior to or during the 2026 calendar year remain taxable on Dec. 31, 2026 (i.e., round one). Amounts invested between Jan. 1, 2027, through Dec. 31, 2033, are taxable on Dec. 31, 2033 (i.e., round two). The ten-year hold period remains unchanged (i.e., all gains from the OZ investment are excluded if held for ten years). For OZ round two, the basis increase rules change. The 5% basis increase on the original deferral after seven years is eliminated. The 10% basis increase on the original deferral after five years is retained and is increased to 30% for investments in qualified rural opportunity funds (i.e., funds with substantially all tangible property located in a rural OZ).

Excess business losses (EBL): EBL limitation is made permanent. The proposal also introduces a new retesting provision in tax year 2026 that requires EBLs to be included in the EBL calculation in subsequent tax years.

• Warning: This provision substantially limits a taxpayer’s benefit from EBLs. Rather than deducting 80% of the prior year EBL under the net operating loss rules, prior year EBLs are added to the current year EBL calculation, effectively limiting a taxpayer’s deduction for prior year EBLs to current year aggregate business income.

Professional sports franchise amortization limitation: The proposal limits amortization from sports franchises to 50% of adjusted basis. This includes Section 197 assets from a franchise engaged in professional football, basketball, baseball, hockey, soccer or other professional sport, or any item acquired in connection with such franchise.

Private foundations: The proposal replaces the 1.39% excise tax on net investment income with a tiered structure based on the aggregate fair market value of assets as of the close of the tax year. The new tax structure is effective for tax years beginning after enactment.

The new bracket structure looks like:

• Less than $50 million: 1.39%
• $50 million to less than $250 million: 2.78%
• $250 million to less than $5 billion: 5%
• $5 billion and greater: 10%

Baker Tilly’s national tax professionals are actively monitoring related One Big Beautiful Bill Act developments in Washington. If you have questions on how the provisions may impact your tax situation, please contact your Baker Tilly tax advisor.

The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.